Rent control cap could be limited to $40

Rent control increases in Santa Monica could be limited to a fixed maximum, regardless of the percentage calculation, if the Rent Control Board passes a cap at their July 8 meeting.

At tonight’s public meeting, the Santa Monica Rent Control Board will consider whether to set a $40 ceiling on 2017 and 2018 rent increases. Back in May, the Board set the 2017 General Adjustment at two percent.

According to the RCB, “With proper written notice (usually 30 days), the general adjustment may be implemented by property owners no earlier than September 1st, 2017 for tenancies that started before September 1st, 2016. Tenancies that started on or after September 1st, 2016 are not eligible for the 2017 general adjustment.”

The yearly adjustment is based on 75 percent of the annual change in the Consumer Price Index for the greater Los Angles area. Since the CPI change was 2.7 percent according to the Bureau of Labor Statistics, the Board set the adjustment at 2 percent. However, a $40 cap would mean some tenants paying market rate prices for rent control apartments would pay much less than the 2 percent increase.

A dollar ceiling is calculated by averaging the eighty-fifth percentile of the maximum allowable rent (MAR) of all controlled units and the eighty-fifth percentile of the maximum allowable rent of all controlled units with a base rent established before January 1, 1999. That amount is then multiplied by the annual general adjustment.

“Because a $40 ceiling would apply only when it would yield a lower rent increase than application of the 2% general adjustment, the ceiling necessarily applies only to higher rents,” said the staff report. “This means that imposing a ceiling would result in a proportionately smaller increase for market-level tenancies than for many long-term controlled tenancies. For example, a tenant paying $1,500 per month will see an increase of 2% or a dollar amount of $30.00. A tenant paying $3,000 per month would pay the $40 ceiling that, while greater in dollar terms, is a percentage increase of only about 1.3%.”

A 2016 analysis by the City found median rental rates for controlled units in Santa Monica had reached an all-time high – increasing 8 percent in just one year. The median price for a rent-controlled studio rose more than 16 percent compared to 2015. Median prices for apartments broke down to about $1,800 for a studio, $2,200 for a one bedroom, $2,950 for a two bedroom, and $3,712 for a three bedroom unit. Nearly 70 percent of the City’s 27,594 rent controlled units charge market rates.

The Board will likely hear protests from vocal landlords who argue the rental increase does not cover their increasing operating expenses.

“Ten years ago, a 30-gallon hot water heater sold for $200, and today it is offered for sale for $900, and with the new earthquake and other regulations, it would take $400 for installation,” Landlord and local attorney Michael Millman wrote in a letter to the Rent Control Board’s Executive Director Tracy Condon.

Rent Control tenants saw their rents rise by 1.3 percent last year.

The Rent Control office will mail information to all tenants and property owners in late June explaining this year’s annual increase and the surcharges owners may include in tenant’s rents.

The Rent Control Board will meet at 7 p.m. Thursday, June 8 inside Council Chambers at City Hall, 1685 Main Street.